Booking 68% Profits and Making a High-Yield Bet on Bakken Oil

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Last week, U.S. markets ended up pretty much where they started with the Dow Jones up 0.13% and the S&P 500 down 0.28%. Global markets continued their relative weakness with the MCSI Emerging Markets Index (EEM) dropping 1.61%.

You were stopped out of PowerShares Global Listed Private Eq (PSP) for a 14.67% gain.

Your bet on Mexico — Fomento Economico Mexicano SAB (FMX) had a strong week, rising 3.38%. With your July $115 call options up 68%, sell half of your options here to lock in your gains. The company announces earnings on Wednesday.

This week’s Bull Market Alert takes us back to the heart of the old U.S. of A. with a bet on booming Bakken oil.

Northern Tier Energy Trust LP (NTI) is an independent, downstream energy partnership with refining, retail and pipeline operations that serve the U.S. Midwest. NTI went public with an initial public offering (IPO) in July 2012. The company owns an 85,000 barrel per day crude oil refinery located in St. Paul Park, Minn. And thanks to the “fracking” shale oil revolution in the Bakken region of North Dakota, Midwestern oil refiners like NTI are minting money.

Another attraction of NTI is its huge yield. For the 2012 third quarter, its dividend was a whopping $1.48 for a mere two months of operations. NTI recently declared its first distribution for 2013 — a payout of $1.27 per unit to be paid on Feb. 28. Although you had to be unit holders of record as of Feb. 21 to get this payout, this was equal to a yield of 17% at the current share price of $28.55.

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The company is set announce earnings on March 14. I expect to see a strong increase in operating income due to improved results in the refining segment. Put another way, NTI will enjoy expanding margins per barrel, thanks to cheap local Bakken oil.

If you are looking purely for high-yield opportunities as the broader market continues to decline, NTI is a hard stock to ignore. And NTI also benefits from being in a sector with a strong uptrend.

A very attractive price-to-earnings (P/E) ratio of 7.83, 80% insider ownership rates and a whopping yield of 18% make NTI a strong buy. And with the stock pulling back from its recent highs, this is a good time for you to enter this position.

So buy Northern Tier Energy Trust LP (NTI) at market today, and place your initial stop at $23.50. If you want to play the options, I recommend the June $30 calls (NTI130622C00030000).

Portfolio Update

Bank of Ireland (IRE) dipped 1.92% over the four-day trading week. The Bank of Ireland is moving forward with an aggressive plan designed to enhance its bottom line through lending to small and medium-sized enterprises (SMEs). IRE is planning to exceed its 2013 SME lending target by 3.5 billion euros. This is one of the best ways to improve its capital ratio, as 99% of businesses in the euro zone are SMEs. IRE is a BUY.

National Bank of Greece SA (NBG) lost 1.46% last week. The Fitch Ratings agency reaffirmed its ‘B-’ rating on NBG’s mortgage-covered bonds last week. These residential mortgage bonds total over 846 million euros. More importantly, Fitch also removed these bonds from their “Rating Watch Negative (RWN)” list. NBG is a HOLD.

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Qihoo 360 Technology (QIHU) closed the week flat. QIHU announced last Thursday that China’s Ministry of Commerce (MOC) placed a very large order for Qihoo 360’s anti-virus products. MOC has plans to deploy this software technology on a department-wide scale. Gaining a foothold within the Chinese government itself is a good sign for QIHU, as insider access to the government is normally what it takes for a large-scale business to be successful in the Chinese business environment. QIHU also announced Wednesday that it would report earnings on March 5. QIHU is a BUY.

Fomento Economico Mexicano SAB (FMX) added 3.38% last week. FMX will report earnings on Wednesday, before markets open. Ten analysts covering FMX collectively have an “Overweight” rating on the stock and a $1.52 earnings per share estimate. FMX is a BUY.

Banco Santander, S.A. (SAN) dipped 0.77% over the past four trading days. One of SAN’s greatest assets is its broad diversification. SAN’s broad exposure to Europe and Latin America make it a safer play than most Europe-focused Spanish banks. SAN is a HOLD.

Market Vectors Vietnam ETF (VNM) tumbled 7.74%. Foreign buying in Vietnam equities reached $140 million in January 2013 alone — enough to make market regulators consider raising the maximum foreign ownership levels in listed companies. However, the sellers gained control briefly late last week and forced VNM down after several weeks of buying. That said, many indicators are still positive. With VNM bouncing strongly off of its low on Friday, 2013’s #1 performing market remains a BUY.

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